Hyundai Motor bets on new Sonata to power sales

SEOUL -- Seeking to jumpstart a sagging domestic car market, South Korea's top auto maker, Hyundai Motor Co., is set to unveil on Tuesday a new model it hopes will help it emulate the path to success of bigger rival Toyota.

Analysts are optimistic the NF Sonata, a premium sedan similar to Volkswagen AG's Audi A6 saloon, can help Hyundai move nearer its target of becoming one of the world's top five car makers by 2010.

The potential significance of the NF Sonata has been likened to that of Toyota Motor Corp's Camry, which was the Japanese car maker's first car sold in volume globally and helped catapult it to the world's number two spot.

The Sonata will be Hyundai's first all-new model in six and a half years, said Suh Sung-moon, an analyst at Dongwon Securities.

"There are so many inquiries about the new model. Despite deep discounts on old Sonata models, buyers are willing to wait, prompting a long waiting list," said Choi Jin-sung, a salesman in charge of a Hyundai Motor outlet in Seoul.

NF Sonata, billed as Hyundai's flagship sedan, will compete with Honda's Accord and Toyota's Camry, analysts say. Hyundai is keeping pricing and technical details under wraps until the launch, but leaked pictures on the Internet have drawn positive comparisons with the A6.

Analysts have bumped up their target price for Hyundai's stock ahead of the launch and issued 'buy' recommendations on the shares, which have gained 22 percent since early July, easily outstripping an 8 percent rise in Seoul's broader market.

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But some analysts are cautious about the timing of the launch given soaring energy costs, stalled local consumption and cut-throat competition from global car makers.

"The risk is it's a gasoline car. Given higher oil prices are fanning interest in fuel-economic diesel models, there is still a question mark on how well the new model will sell," said Kim Hag-ju, a Samsung Securities analyst.

Samuel Rhee, a Morgan Stanley analyst, was also cautious.

"I'm not gung-ho bullish. I think they will be able to maintain the number of Sonata they used to sell but whether they would be able to increase market share and take over customers from Toyota and Honda, it's a bit early to say," Rhee said.

Hyundai has dramatically raised its profile on the world stage, with a benchmark study by research firm J.D. Power showing an improvement in its quality to match the best Japanese brands. It leapt from 10th place on last year's list to joint second with Honda this year, trailing only Toyota.

But Hyundai faces a tough time as a red-hot Chinese economy slows and sales growth weakens in the United States, where it has a 2.4 percent market share.

"With an overall improvement in quality, what Hyundai is hoping is that with a bigger car and a better car, they will be able to price cars better as well," Rhee of Morgan Stanley said.

"So the price gap between Camry, Accord and Hyundai's Sonata will also narrow. There is a line of opportunity and risk."

Hyundai's U.S. plant will manufacture the new Sonata next year.

The Sonata series, the top selling cars in South Korea, have enjoyed strong brand recognition since their launch in 1985. In the first half of 2004, Hyundai sold 39,982 Sonatas at home and exported 55,145. The firm has not yet made public its sales target for the NF Sonata.